Hiring cost comparison
Employee vs Contractor Cost Calculator
Compare the practical cost of hiring a W-2 employee versus paying an independent contractor, including payroll taxes, benefits, equipment, overhead, utilization, and contractor rate premiums.
Last reviewed: August 2, 2026
Employer cost planning
Compare Hiring Costs for the Same Period
Enter annual employee costs and contractor engagement terms. The calculator prorates employee cost to the selected contract duration for a like-for-like planning comparison.
This comparison does not determine whether a worker is legally an employee or independent contractor. Classification depends on the actual relationship and applicable law.
Cost Categories to Compare
Employee Costs
Salary, employer payroll taxes, health benefits, retirement match, paid time off, equipment, software, and management overhead.
Contractor Costs
Hourly or project rate, expected billable hours, contract duration, onboarding time, project risk, and vendor management.
Hidden Tradeoffs
Flexibility, speed, continuity, classification risk, institutional knowledge, and supervision can affect the real cost.
Simple Cost Formula
Employer planning formula
Total employee cost = salary plus payroll taxes plus benefits plus overhead. Total contractor cost = contractor rate multiplied by hours plus onboarding, management, and project risk assumptions.
Short projects can favor contractors because the employer avoids long-term benefit and payroll commitments. Ongoing roles may favor employees if continuity, control, and team knowledge are valuable.
This page does not provide employment, legal, tax, or classification advice. Consult qualified counsel for worker classification questions.
FAQ
What percentage should I add to salary for employee cost?
Employers often model payroll taxes, insurance, paid leave, retirement match, equipment, software, and overhead separately instead of using one universal percentage.
Why can contractors still cost less at a higher rate?
The total project may be shorter, require fewer long-term commitments, and avoid some employer-paid benefits and overhead.